Non-profit accounting: a brief guide for beginners!

Non-profit accounting is a method through which non-profit organizations record, report, and manage their finances. Non-profit accounting is different from usual accounting in many ways. In the case of profit-making organizations, the main focus is profit. In a non-profit organization, the main goal is to focus on accountability and follow a set of rules. This set of rules helps to keep a record of the donors and contributors.

For non-profit accounting, the Coventry accountants separate their funds into three groups. For example:

• Restricted funds: these funds include money needed for projects supported by the supporters.

• Temporarily fixed funds: these funds are available for only a limited period. The non-profit organization uses these funds for a certain amount of time, and after the period is over, the funds are no longer available to them.

• Unrestricted funds: these funds, as the name suggests, are your annual funds, which are available throughout the year. The organization can use these funds on

Three main differences between profit accounting and non-profit accounting are mentioned below:

• In non-profit accounting, only the statement of operations is important. Whereas, in profit accounting, both the income statement and the statement of operations are important.

• In non-profit accounting, the final document is the statement of financial position. In profit accounting, the balance sheet is the final document.

• The income credential in non-profit accounting is determined based on the statement of changes in net assets. But, the statement of retained earnings is the main method of profit accounting.